Sunday, July 7, 2013

The shale gas revolution: is it already over?

The production of natural gas in the US has not been increasing for about two years. Fitted with a Gaussian function, it shows a peak in the second half of 2012 and, from then on, a tendency to decline. Decoupled in its various components, the data show that shale gas production is still increasing, but not fast enough to compensate for the decline of conventional gas production.

Are we already seeing the end of the "shale gas revolution"? It is too early to say but, surely, these data agree with the viewpoint of those who had been seeing the whole story as a short lived financial bubble. (see, e.g., a recent series of statements by Arthur Berman)

9 comments:

According to a respected source "Drill Baby Drill",Tight Oil should peak in 2016, too.

That analysis showed ~$50 billion/yr in new CAPEX wasrequired to maintain production.

So, given a 20 year life of this resource, that is assuming drilling began in earnest in 2003, and will essentially be over by 2023, lifting tight oil/gas will have cost ~$500 billion, over the life of the play(s).

I assert that subsidizing conversion of US housing to PassivHaus, is a better use of funds/resources.

OR

Subsidizing emplacement of PV on suitable roofs at a negotiated price of $0.50/watt, including mounting and connection costs would provide 1 Twe of power, displacing 1.6 million BOE/day

The composite graph above is very clear. But if when disaggregated into its various components shale gas production is still growing -meaning that conventional gas production must be declining significantly - then the graph doesn't necessarily prove that we are seeing the end of the "shale gas revolution"? Though this may be true nonetheless for other good reasons (many plausible ones exist such as small size of each of the trapped deposits, increasing costs of drilling / fracking for ever smaller gas traps, and etc.) . So the shale gas revolution could well be a bubble. The effects of that (physical?) bubble popping on the financial markets as a "financial bubble" are however not that easy to deduce and analyze and I think it's difficult to make reliable predictions in that area or in that particular respect. Financial markets are probably currently more threatened by other and larger bubbles (of all sorts) whose precise timing for "popping" is also not that easy to forecast. Meanwhile we just whizzed past 400 ppm of CO2 and are of course heading far higher, not to even mention the methane. (If peak oil and gas don't get us earlier, climate change will get us a bit later (it's already "getting us") and before that some of the financial madness of various types (e.g. issuing trillions of funny money) is also likely to pop and cause further economic havoc or collapse) . Certainly lots to look forward over the next 15 years and with lots of surprises. So let's not spoil the fun by making interesting predictions that could be too reliable or certain !

Calling the shale gas revolution a "bubble" is problematic. Most independent analysts have pointed out that virtually all the companies from Exxon on down are losing money in the process! It is ERGO more of a financial bubble, not an energy production bubble. The only reason it is continuing is due to a complex web of contracts, subsidies, leases and misleading articles and bogus pitches to "investors". In addition the EROEI of the process is horrible as is the waste of other resources like water, sand, chemicals and the like. One good permanent contamination of a major aquifer will also kill it, and it can't happen soon enough.

Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)

Ugo Bardi's blog

The depletion of the cheap ores that we have been extracting up to now is at the root of our economic problems.

Extracted

A report to the Club of Rome published by Chelsea Green. (click on image for a link)

Solarino

Cassandra

This blog was known as "Cassandra's Legacy" up to March 2014. It has changed name, but not its ideas. And don't forget that Cassandra's prophecies always turned out to be right!

About the author

Ugo Bardi teaches physical chemistry at the University of Florence, in Italy. He is interested in resource depletion, system dynamics modeling, climate science and renewable energy. Contact: ugo.bardi(littlewhirlything)unifi.it.